The Hong Kong Monetary Authority (HKMA) is teaming up with the International Finance Corporation (IFC) to help commercial banks address climate change, as it seeks to cement the city’s place as a hub for green financing as US$29 trillion in green and climate investment opportunities are expected globally over the next decade.
The HKMA, Hong Kong’s de facto central bank, is a founding member and first regional anchor of the new Alliance for Green Commercial Banks, an initiative the IFC hopes will bring together financial institutions, research groups and technology providers to tackle the climate crisis.
The initiative is designed to help lenders address their own knowledge gaps in green financing and tap unmet needs for sustainable and climate-focused financing, the HKMA said at a press conference and signing ceremony on Monday.
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“This is a tremendous business opportunity, given so much investment is needed,” said Edmond Lau, the HKMA’s senior executive director overseeing external affairs, financial infrastructure and research.
About US$18 trillion in green and climate-related financing opportunities are expected to emerge in Asia in the next decade, Lau said.
Those opportunities include the development of environmental friendly buildings, electric vehicles, better waste management and more efficient energy usage, according to Darryl Chan Wai-man, a HKMA executive director responsible for the city’s development as an international financial centre.
“We should encourage the private sector, the financing sector, i.e. banks, to provide financing,” Chan said. “There is such a demand in the market.”
In May, seven financial regulators and government bureaus, led by the HKMA, formed a cross-agency body to promote the city’s efforts to become a green financing hub.
The Hong Kong government announced a programme two years ago to issue up to HK$100 billion (US$12.9 billion) in green bonds, raising US$1 billion with its first bond under the programme last year.
Vivek Pathak, the IFC’s regional director for East Asia and Pacific, said there is a “huge opportunity” for further green development in Hong Kong, but it has not always been viewed as viable from a financial perspective in the past.
“It is imperative, from a business sense, in my view,” Pathak said.
The HKMA and the IFC want the new alliance to encourage peer-to-peer knowledge sharing between banks and organise workshops, seminars and other educational opportunities to help bankers develop the skills needed to facilitate green financing, particularly as further opportunities open up in the Greater Bay Area.
That could include teaming up with universities as manpower remains a problem for the industry, Chan said.
For example, the HKMA, alongside the Hong Kong Institute of Bankers, debuted a banking talent programme this year to prepare new graduates for a career in banking.
The HKMA also is in the middle of a three-phase effort designed to assess the “greenness” of banks in the city and develop supervisory requirements for the banking industry around sustainable financing.
“The supervisory framework in the future wouldn’t be a ‘one-size, fits all’ [approach],” Lau said. “It will vary with banks.”
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